The range of business models

Business models are diverse and applicable across various industries. A useful classification of business models is provided by Weill and Vitale (2001), which includes 16 different archetypes, ranging from innovative models to illegal practices such as human trafficking. The companies that innovate at the level of their business models tend to experience greater growth than those that focus solely on product or operational innovation.

Innovating Business Models

Johnson et al. (2008) suggest several methods for startups to create innovative business models:

1. Revenue/Pricing Model: This involves changing how revenue is generated through new value propositions and pricing strategies. An example is Ryanair's development of a no-frills air travel model that leverages economies of scale.
2. Enterprise Model: This model focuses on specialization and reconfiguring the business to deliver greater value. For instance, Innocent Drinks successfully competed with industry giants by outsourcing production and distribution while building strong relationships with retailers.
3. Industry Model: This model involves redefining an existing industry, entering a new industry, or creating an entirely new one. Better Place, for example, developed an electric vehicle infrastructure, revolutionizing the automotive industry.

Sixteen Detailed Business Model Archetypes

The 16 business model archetypes outlined by Weill and Vitale (2001) provide a comprehensive framework for understanding the various ways businesses can operate based on the type of assets they leverage.

Here is a detailed description of each archetype:

1. Entrepreneur (Serial Entrepreneur)

• Asset Type: Intangible (Entrepreneurial talent)
• Description: This archetype involves individuals who repeatedly create new businesses. Serial entrepreneurs are known for launching multiple ventures over their careers, each time leveraging their expertise, networks, and often their reputation to start new enterprises. An example includes entrepreneurs like Mark Zuckerberg, who co-founded Facebook.

2. Manufacturer

• Asset Type: Physical (Products)
• Description: The manufacturer archetype involves creating physical products, such as cars or mobile phones. Manufacturers often add value by incorporating services around these products, like warranties or maintenance services. Volkswagen, which produces automobiles, is a typical example of this model.

3. Inventor/Creator

• Asset Type: Intangible (Intellectual property)
• Description: Individuals or companies in this archetype create or design products that are sold or licensed. This model is centered on innovation and the commercialization of new inventions. ARM Holdings, which designs computer chips, operates under this archetype by licensing its designs to manufacturers.

4. Human Creator

• Asset Type: Human (Talent, illegal activity)
• Description: This controversial and illegal archetype involves creating humans for specific purposes, such as human trafficking. In science fiction, it’s often depicted as creating "designer babies" or genetically modified humans. It remains a speculative and unethical concept in the real world.

5. Financial Trader

• Asset Type: Financial (Capital)
• Description: Financial traders manage and trade financial assets like stocks, bonds, or currencies. Investment banks and hedge funds are typical examples, engaging in activities like underwriting, trading, and financial advisory.

6. Wholesaler/Retailer

• Asset Type: Physical (Goods)
• Description: Wholesalers buy products in bulk and sell them to retailers or directly to consumers, often without significant modification. Retailers, on the other hand, sell products directly to end consumers. Examples include companies like Tesco (a retailer) and Costco (a wholesaler).

7. IP Trader

• Asset Type: Intangible (Intellectual Property)
• Description: IP traders specialize in buying, selling, or licensing intellectual property such as patents, trademarks, and copyrights. Companies like Technicolor, which manages patents and licenses them to other firms, fit into this archetype.

8. Human Distributor

• Asset Type: Human (Illegal activity)
• Description: Similar to the human creator, this illegal archetype involves human trafficking, where individuals are moved or traded for forced labor or exploitation. It is a criminal activity and represents a severe violation of human rights.

9. Financial Landlord

• Asset Type: Financial (Capital)
• Description: Financial landlords manage and invest capital, typically in the form of loans or mortgages, generating income through interest. Retail banks and insurance companies often operate under this model by providing loans, mortgages, and financial services.

10. Physical Landlord

• Asset Type: Physical (Property)
• Description: This model involves owning physical assets like real estate, which are then rented or leased out to generate income. Examples include hotel chains that rent rooms or car rental companies like Hertz.

11. Intellectual Landlord

• Asset Type: Intangible (Content, IP)
• Description: Intellectual landlords own intellectual property, such as books, music, or software, and generate revenue by licensing or selling this content. Publishers and software companies that license software to users are prime examples.

12. Contractor

• Asset Type: Human (Services)
• Description: Contractors are individuals or firms hired to perform specific tasks or projects, often on a temporary or project basis. This model is common in industries like construction, where general contractors oversee building projects by coordinating subcontractors.

13. Financial Broker

• Asset Type: Financial (Capital)
• Description: Financial brokers act as intermediaries between buyers and sellers of financial assets, earning commissions on transactions. Examples include stockbrokers who facilitate the buying and selling of securities for clients.

14. Physical Broker

• Asset Type: Physical (Goods)
• Description: Physical brokers mediate the sale of physical goods, connecting buyers and sellers, often without taking ownership of the goods. Estate agents (real estate brokers) and platforms like eBay, which connect buyers and sellers, fall into this category.

15. IP Broker

• Asset Type: Intangible (Intellectual Property)
• Description: An IP broker mediates the sale or licensing of intellectual property. They help inventors or owners of patents, trademarks, or copyrights find buyers or licensees, handling negotiations and transactions.

16. HR Broker

• Asset Type: Human (Labor)
• Description: HR brokers, such as employment agencies, match employers with potential employees. They often specialize in recruitment for specific industries and may provide temporary or permanent staffing solutions.

Enterprise Models

Enterprise models focus on redefining the internal and external boundaries of an organization to create a new business model. This can involve moving up or down the value chain, leveraging a network of partners, or outsourcing non-core activities. Examples include Apple’s move into digital music with iTunes or Samsung’s vertical integration strategy with chips for cell phones. Companies must consider whether to manufacture in-house, collaborate with another company, or outsource to achieve sustained value creation.

Industry Models

New industry models are rare but can cause significant disruption when they emerge. Examples include Google's creation of the search industry and Uber's disruption of the taxi industry. These models often redefine the industry value chain, leading to widespread adoption by competitors. Ryanair's low-cost airline model, for instance, gave rise to the entire low-cost industry, now followed by numerous airlines.